CySEC informs potential applicants for the MIFID II authorization requirements

The Cyprus Securities and Exchange Commission (CySEC) has made an announcement, informing all interested parties about the Authorisation of Data Reporting Service Providers.

In particular, this Announcement aims to inform potential applicants and assist them in their preparations for the MIFID II authorization requirements, which will apply from 3 January 2018.

Firms that intend to apply for authorization as a DRSP should notify CySEC of their intention by 30 September 2017 by sending an email to [email protected] and are encouraged to file an application as of November 2017 using the Application Form for the authorisation to provide Data Reporting Services.

CySEC has also emphasized that all market participants that are affected by these changes shall prepare accordingly for their implementation. Such market participants include investment firms or market operators operating a trading venue to operate the data reporting services of an APA, a CTP and an ARM, subject to the prior verification of their compliance with Title V of the Law L.87/(I)/2017, and entities that will no longer be exempted from the scope of the Law L.87/(I)/2017.

The new Investment Services and Activities and Regulated Markets Law of 2017 (L.87/(I)/2017), provides that Data Reporting Services Providers (‘DRSPs’) are subject to authorisation.

The types of DRSPs are set out in Annex 1, Section D of MiFID II:

  • Approved publication arrangements (APAs): An APA is defined as a person authorized to provide the service of publishing trade reports on behalf of investment firms for the purpose of post-trade disclosure (Articles 20 and 21 of MiFIR).
  • Approved reporting mechanisms (ARMs): An ARM is a person authorized to provide the service of reporting details of transactions to competent authorities or to ESMA on behalf of investment firms.
  • Consolidated tape providers (CTPs): A CTP is a person authorized to provide the service of collecting post-trade information for financial instruments (Articles 6, 7, 10, 12 and 13, 20 and 21 of MiFIR) from trading venues (i.e. regulated markets, Multilateral Trading Facilities and Organized Trading Facilities) and APAs. A CTP will consolidate these reports into a continuous electronic live data stream providing price and volume information per financial instrument, both for equity and non-equity products.

However, CySEC notes that the CTP regime will only apply to equity and equity-like financial instruments as of 3 January 2018, whereas it will be extended to non-equity instruments from 3 September 2019.

An investment firm or a market operator operating a trading venue may provide the data reporting services to an APA, a CTP and an ARM, provided they are compliant with the relevant provisions applying to DRSPs.

Similar to investment firms, the authorisation for the data reporting services shall be valid for the entire European Union and therefore, the DRSPs may provide such services throughout the European Union.

In relation to the DRSPs, CySEC draws special attention to:

  1. Title V of MiFID II, which has been transposed to national law, Law 87/(I)/2017;
  2. Commission Delegated Regulation (EU) 2017/571 of 2 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the authorisation, organisational requirements and the publication of transactions for data reporting services providers, (Regulation 2017/571), which is directly applicable. It is noted that the provisions on the non-equity tape of Article 65(2) of MiFID II will only apply from September 2019. To this end, Regulation 2017/571 will be amended by adding a new Article specifying the scope of the non-equity tape. The
    relevant amendment is included in the Final Report on Draft RTS specifying the scope of the Consolidated Tape for non-equity financial instruments.
  3. Chapter VI of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (Regulation 2017/565) which is directly applicable.
  4. Commission Implementing Regulation (EU) 2017/1110 of 22 June 2017 laying down implementing technical standards with regard to the standard forms, templates and procedures for the authorisation of data reporting services providers and related notifications pursuant to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments, (Regulation 2017/1110) which is directly applicable.
  5. ESMA Guidelines on the management body of Data Reporting Services Providers that will be published in the coming weeks.

Read the complete announcement here.

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